Final answer:
An adjustment is necessary in accounting if the market value of inventory is greater than the assigned cost.
Step-by-step explanation:
In accounting, when the market value of inventory is greater than the assigned cost, an adjustment is needed to reflect this increase in value.
This adjustment is known as a write-up or increase in value of inventory.
For example, let's say a company has an inventory of 100 units of a product and the assigned cost of each unit is $10. However, due to changes in the market demand, the market value of each unit has increased to $15.
In this case, the company would need to make a write-up adjustment to increase the value of their inventory from $1,000 ($10 x 100) to $1,500 ($15 x 100) to accurately reflect the current market value of the inventory.
An adjustment is necessary in accounting if the market value of inventory is greater than the assigned cost.